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Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 1094
Experience:  16+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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We have to amend our 2011 taxes. My husband received a sign-on

Resolved Question:

We have to amend our 2011 taxes. My husband received a sign-on bonus in 2011, then had to repay half when he left the company the following year. Do you suggest hiring an accountant or just using the tax software to amend? (Note: This is also the year that I had foreign income, so our taxes were more complicated. We would have to deal with foreign exchange rates if we were audited.)
Submitted: 1 year ago.
Category: Tax
Expert:  Barbara replied 1 year ago.

Welcome and thank you for giving me the opportunity to assist you with your tax question.

 

Unless you are absolutely confident in your ability to amend the return, my best advice would be to have a major retail tax preparation company or a local CPA or Enrolled Agent prepare your tax return.

 

Simply amending your return will not necessarily mean that you will be audited, but it is my opinion that it would be in your best interest to have a professional amend your return.

 

The IRS is now conducting more random "reviews" of tax returns, whether amended or not.

 

Thank you and best regards,

Barb

Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 1094
Experience: 16+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
Barbara and other Tax Specialists are ready to help you
Expert:  Barbara replied 1 year ago.

Hi, Nicole.

 

Just a short note to thank you for the positive rating. It is most appreciated. If you have any questions in the future, please feel free to put "for bkb1956 or Barb" in the subject line, and I will be happy to assist you. Recommendations to family and friends are also always appreciated.

 

Thanks again, and have a great day!

Barb

Expert:  Barbara replied 1 year ago.

Hello again, Nicole.

 

Although I answered your question correctly, if the repayment of half of the sign-on bonus is the ONLY reason you are amending your tax return, you would not amend the return for repayment of previously taxed income. If $3,000 or more and if you reported it as wages, unemployment compensation, or any other non-business income, you would deduct it as a miscellaneous itemized deduction on Schedule A of Form 1040 in the year it was repaid.

 

I apologize for any confusion I may have caused you.

 

Thank you.

Barb

Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 1094
Experience: 16+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
Barbara and other Tax Specialists are ready to help you
Customer: replied 1 year ago.

That is an unfortunate cutoff. He tried deducting it from the income in 2012, but it was rejected.


 


We do standard deduction. If it's an itemized deduction, does that mean the taxes we paid are lost?

Expert:  Barbara replied 1 year ago.

Hi, Nicole.

 

Your alternatives are:

 

if the amount is $3,000 or less, it is a miscellaneous itemized deduction subject to the 2% limitation.

if the amount is more than $3,000, it is a miscellaneous itemized deduction which is not subject to the 2% limitation.

If the amount was received under a "claim of right" (you had unrestricted use of the funds but later found out you didn't), you have one more choice: if the amount is more than $3,000, you can choose instead to claim a credit for the additional tax incurred by reporting the repaid amount in income. See IRS Publication 525 for an explanation of that method at pages 33 and 34.

 

The link for Publication 525 can be found at the following: http://www.irs.gov/pub/irs-pdf/p525.pdf

 

Let me know if you have any other questions. Thank you.

 

Barb

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